What is a Wyoming Limited Partnership?
A Wyoming limited partnership (LP) is a business entity based on the structure of a general partnership with the addition of limited partners. In a Wyoming LP, the limited partners provide the capital (money), and the general partners manage the business. The LP provides the limited partners limited liability and protects the limited partners’ personal assets. For limited partners in an LP, only their investment is at risk. Limited liability protections are not afforded to the general partners of an LP. This structure creates an inherent collateral between the limited and general partners. Limited partners invest in the LP, and in exchange, the general partners run the business and put their names and potentially their personal assets at risk. To offset that risk, many Wyoming LPs will use an LLC as the general partner.
Why Form a Wyoming Limited Partnership?
The unique structure of the Wyoming LP has created several opportunities for which the LP is most often utilized.
Estate Planning with Family Limited Partnerships
A Family LP is not a different kind of LP entity; the name is used only to denote the function of the LP. The Family Limited Partnership is used for estate planning, especially with closely held family businesses. The nature of the LP allows parents to establish tightly regulated entity to pass a business or assets onto the next generation. The Wyoming Family LP typically operates like this: The parents form a Wyoming LP and list themselves as the general partners then name their children (and sometimes themselves as well) as the limited partners, passing the interests of the business or other assets to the limited partners over time.
There are several advantages to passing assets through a Wyoming Family LP. As the general partners, the parents remain in full control of the assets. In the case of a business, this allows the younger family members to learn how the business operates, while the parents maintain control of the company. Often, they can write into the partnership agreement that upon the death of the general members, all interests are given to the surviving limited partners.
The Wyoming LP can also help to offset the income taxes. Since the limited partnership is a pass-through entity, each partner is required to pay their share of the taxes. If the younger family members are in a lower tax bracket than the parents, the parents can offset the amount of income taxes distributing shares to the children so that they pay less in taxes. It can also be written into the partnership agreement that the children’s shares aren’t distributed to them, as some may be put aside to pay their income taxes and the remainder go into their savings account. This is less of an issue in Wyoming, as we don’t have a state personal income tax, but it can help with federal taxes.
The real advantage of a Family LP in Wyoming, though, lies in with estate taxes and gift taxes. For families with real estate investments, the Wyoming LP can gift the partnership interests to the younger family members, which removes the interests from their estate while allowing the parents to remain in control of the assets. Additionally, families can find tax savings by gifting expensive assets to the limited partners. The tax savings comes through an IRS rule which allows limited partnership interests to be discounted up to 50 percent, as the interests of a limited partnership cannot be easily sold or traded. Since the interests aren’t valued as high as they would be if they weren’t LP interests, the limited partners won’t have to pay as much when estate taxes are due. For example, if someone has a 50 percent interest in a Wyoming family limited partnership, if the assets were worth $1 million, then discounted by 30 percent as an LP interest, the interest would be valued at $350,000 instead $500,000. If the estate tax was at 50%, then their tax bill would be $175,000. However, the 30 percent discount would provide the limited partner $75,000 tax savings. Be aware, though, that the steeper the discounts on the limited partner asset, the more likely it is to receive a challenge from the IRS.
Master Limited Partnerships (MLPs)
Similar to corporations that sell stock publicly, some limited partnerships trade their interests publicly. These Wyoming LPs are known as Master Limited Partnerships (MLPs). The IRS has determined that qualifying MLP operations must be confined to the industries of transportation, storage, processing, refining, marketing, exploration, production or mining of natural resources. MLPs here in Wyoming primarily deal with coal and oil. The advantage of investing and operating these oil and coal endeavors as an Wyoming MLP rather than a Wyoming corporation is that the MLP benefits from the pass-through taxation status of the limited partnership. The MLP does not have to pay corporate income tax to the federal government. Wyoming MLPs are highly-regulated and must qualify with the IRS and register interests as securities with the Security Exchange Commission (SEC).
Specialized Business Ventures
While many businesses may be better suited as a Wyoming LLC, some business ventures take a lot of capital on one side and a lot of know-how on the other. This mix of the need for investors combined with a need for know-how business men and women often makes for a convenient use of the Wyoming LP. LPs are also used in activities like aircraft leasing, tractor trailer leasing, real estate investment, cattle feeding programs, and medical technology investments.
Wyoming LP Features
For many, the Wyoming LP is a lesser known business entity. For those unaccustomed to the intricacies limited partnership, you’ll find explanations to all the unique aspects of the limited partnership below:
When a partnership is formed in Wyoming, it falls under our state’s Uniform Partnership Act. The act states that a partnership interest is personal property, and that “a partner is not a co-owner of partnership property and has no interest that can be transferred, either voluntarily or involuntarily, in partnership property.” Basically, that means that partnership interest is nontransferable.
LP Interests as Securities
Interests in a Wyoming LP can become complex if the limited partnership is selling the interests in an MLP. In 1946, the US Supreme Court determined that in an investment where someone invests their money and expects profits “soley from the efforts of others” qualifies as a security (SEC v W.J. Howey (328 U.S. 293)). This case has given rise to what is known as The Howey Test. For a limited partner, some attorneys have argued that if a partner is not involved in the operation of the LP whatsoever, their interest in the Wyoming LP may need to be registered as a security and conform to applicable federal and state laws (this can be a burdensome and confusing process). Profits from securities are vulnerable to capital gains taxes, which vary based on the amount of income. However, not all limited partnership interests must be registered as securities. Depending upon the partnership agreement, limited partners in Wyoming can be granted voting rights without voiding their liability protections, which may negate having to register interests as securities. If the interests are not securities, the distributions a limited partner receives will be taxed merely as personal income. If a Wyoming LP has more than 15 partners, interests must be registered as securities.
Wyoming LP taxation can become complex. Especially if an attorney (limited partners may need to consult one) determines interests should be registered as securities. If so, a limited partner will likely need the help of a tax specialist to determine the yearly tax bill. The added expense can be worth it, though, as a tax specialist will recognize how to best take advantage of depreciation, capital losses, and what percentage of the distribution can be counted as return of invested capital, which is not taxed.
What’s highly publicized about the Wyoming LP is that limited partners’ personal assets are protected and only the money invested is at risk should the LP be sued. However, that protection can be broached depending upon the role of the limited partner. Should a limited partner be active in managing the partnership, they may risk their liability protections. But our Wyoming statute states that they would only be found liable to parties that knew the limited partner was acting in a management capacity.
LLCs and Corporations Can Act as General Partners
To offset the liabilities of a general partner, many Wyoming LPs feature LLCs as the general partner. This adds additional paperwork to the general partner’s plate, however, in many cases reducing the personal liability is well worth the additional annual fees and records keeping.
Limited Partner Privacy
Limited partners are able to be silent partners in the partnership, as far as public documents are concerned. Limited partners are not listed on the Certificate of Limited Partnership that is filed with the Wyoming Secretary of State.
Although the limited partners are not required to be listed on the Wyoming LP’s formation documents, Wyoming law stipulates that the LP must keep records of all partners on-hand at the Wyoming LP’s office location. All Wyoming LPs must keep at their office the following: A current list of the full name and last known business address of each partner separately identifying in alphabetical order the general partners and the limited partners; A copy of the certificate of limited partnership and all certificates of amendment; copies of the limited partnership’s federal, state and local income tax returns and reports, if any, for the three most recent years; and a copy of the partnership agreement. These records are also subject to inspection at the request, and at the expense, of any partner during ordinary business hours.
Wyoming Partnership Agreement Requirements
Aside from the Certificate of Limited Partnership (the document that forms the the Wyoming LP), the most important document in the partnership agreement. The partnership agreement is not filed with any state agency, but Wyoming requires that you keep a copy at the LP’s office. The agreement should address all of the partnership’s internal workings—how profits and losses are distributed, which general partner has to do what, admission of new partners, actions that may result in the removal of a partner, etc. Wyoming partnership statutes also mandate that at the very least the following information must be in the agreement:
- The amount of cash and a description and statement of the agreed value of the other property or services contributed by each partner and which each partner has agreed to contribute.
- The times at which or events on the happening of which any additional contributions agreed to be made by each partner are to be made.
- Any right of a partner to receive, or of a general partner to make, distributions to a partner which include a return of all or any part of the partner’s contribution
- Any events which will cause the limited partnership is to be dissolved or wound up.
Wyoming LP (Limited Partnership) Advantages
As a business entity, the Wyoming LP has a variety interesting benefits that can serve as a tool in specialized business situations. Below, you’ll find the top 5 advantages of the Wyoming LP, so you can better understand if it’s the right entity for your business venture in Wyoming.
Collateral for Capital
Unlike any other entity, the Wyoming LP offers investors and would-be entrepreneurs a unique opportunity. The structure of the LP was built on the concept of an investor putting money into a business without any responsibility in actually running the business. The investors become the limited partners and are protected by Wyoming’s strong asset protection laws. This exchange is also advantageous for the general partners who are responsible for running the business. The general partners can come to an investor with a business plan. The investor fronts the money for the business. The general partners run the business. As a form of collateral for the investment, the general partners have no limited liability protections, so they are essentially staking their personal names and assets against the limited partners’ money. This collateral operates as a form of good faith ensuring the general partners will do all they can to make the business venture a specialized one. The Wyoming LP’s profits will be split according to stipulations in the partnership agreement.
The IRS allows interests in a limited partnership to be valued at a discounted rate, as Wyoming LP interests cannot be easily be sold. This means families who utilize a limited partnership can often gift more to their children without paying taxes, and estate taxes can potentially be vastly reduced.
Simplistic Business Investing
One benefit of the Wyoming LP for investors is that the limited partner isn’t responsible for operating or managing the business. The general partners are in full control of the business operations. This structure allows for limited partners to invest and wait for the return on investment (ROI).
General Partner Freedom
While the limited partners receive the limited liability in a Wyoming LP, the general partners have the freedom to operate the business how they see fit. The limited partners have no management responsibilities, which means the general partners do, and they can make all the contracts and deals for the business without the limited partners’ permission. Limited partners can, however, be granted voting rights in the partnership agreement.
Although the Wyoming LP does require advanced forms of accounting, all profits of the LP pass to the partners as personal income. A Wyoming LP is not taxed separately from the partner, which unlike to a Wyoming corporation, allows the general partners and limited partners to avoid double taxation.
How to Form a Wyoming LP
Forming a Wyoming Limited Partnership (LP) requires that you file the the Certificate of Limited Partnership with the Wyoming Secretary of State. Below, you’ll find the general instructions on how to complete the document and fulfill the necessary requirements.
Note: Best Wyoming Registered Agent is fully capable and ready to form your Wyoming LP. We charge $200 total! That includes everything you need to launch your business endeavor: the filing, all organizational documents, and a year of the best Wyoming registered agent service.
Fill out the Wyoming Certificate of Limited Partnership
Wyoming doesn’t have online filings for LPs, so you must complete the on the Wyoming Secretary of State’s website, the LLC filing online is instant. If you use the paper form, it’ll take at least three days for the filing to be completed.The Articles of Organization is the form you file with the Wyoming Secretary of State to form a Wyoming LLC. The articles will require you to include the following information:
- Name of the LP
You’ll need to do a business name search in the secretary of state’s database to find an available business name. The name must include the words “Limited Partnership” without abbreviation.
- Check Box to Elect to be a Limited Liability Limited Partnership (LLLP)
To learn more about Wyoming LLLPs, see our Wyoming limited liability limited partnership (LLLP) page.
- Registered Agent
A Wyoming registered agent receives official mail and service of process on behalf of an LP in Wyoming. The registered agent must have a physical address in Wyoming where they can physically receive a legal document (P.O. boxes and virtual offices are unacceptable) during normal business hours. We offer registered agent service for $50 a year, and if you hire us, we’ll provide filing tips and all the forms you need to start a Wyoming LP.
- Mailing address and Principal office address
You can list two different addresses, if desired. The mailing address is where you’d like to receive mail, the principal address is where the business operates. If you hire us for registered agent service, you can use our address in both boxes if you’d like.
- Name and Business Address of Each General Partner
Name and business address of each general partner. The limited partners remain anonymous.
- The Amount of Cash or Description and Estimated Value of the Property Put Forth as Capital
The Wyoming LP does need to list in its formation document the amount of capital put forth by the limited partners.
- Dissolution Date
Wyoming LPs do not exist perpetually. You will need to least a date upon which the limited partnership will dissolve.
- Signature of Each General Partner
Signature must be signed in black ink. If you’ve hired us to form your Wyoming limited partnership, we’ll email you the form for you to sign after we’ve completed it. You can either sign and mail it to the secretary of state, or send it back to us and we’ll mail it for you.
- Name of the LP
Complete Consent to Appointment by Registered Agent
The registered agent must sign the consent form. The signature must be an original. Attach the consent form as an addendum to your certificate.If you’re forming your own LP and hire us as your Wyoming registered agent, you can call us and request a paper consent form, which we will send you by mail.
Submit the Certificate of Limited Partnership
You can file your articles with the Wyoming Secretary of State through the mail or by walking them in. The articles cost $100 to file. Once the secretary of state has received Wyoming LP’s formation documents, it may take up to two weeks until you receive confirmation. Once you receive the confirmation from the secretary of state, your Wyoming LP will be active. Congratulations!
Wyoming Limited Partnership Costs
|Wyoming Certificate of Limited Partnership Secretary of State filing fee||$100|
|Wyoming Partnership Annual Report fee (due every year on the first day of your Partnership’s anniversary month)||$52, if filed online|
|Best Wyoming Registered Agent Partnership formation fee||$50|
|One Year of Best Wyoming Registered Agent service||$50|
|Total Wyoming Partnership Cost:
For $200, we’ll form your Wyoming LP and give you a year of Wyoming registered agent service.
Simple Wyoming LLP Formation
While you may need to consult with an attorney to for estate planning purposes, you can hire us to form a Wyoming LP and we’ll take care of the paperwork and save you money. Every Wyoming LP formation order includes:
- The best customer service
We’ll answer your questions and explain what needs to be done to form your LLP today.
- Same day filings
Within one business day, we’ll complete and file your LP partnership certificate with the Wyoming Secretary of State. Then we will notify you within minutes of receiving confirmation that your LP has been activated by the state.
- Wyoming registered agent service
We provide clients with secure, online accounts; document tracking; real-time e-document delivery; annual report reminders; access to pre-populated state forms; and the best Wyoming registered agent service.
We are one of only a few registered agents in Wyoming that own our building. We don’t rent, and we certainly don’t operate out of a virtual office like some of our competitors. That means you can count on us for years to come.
If personal privacy is a concern, we can address any concerns you have about keeping personal names off public documents in Wyoming.
- Fair price
We operate on a high-volume, low-cost business model, as we specialized in doing a few things extremely well. For that reason, we offer a highly competitive prices on all services and always will.